Stability of the demand for M1 and harmonized M3 in Finland
We derive a theoretical model for the demand for money using the adjustment cost augmented money-in-the-utility-function approach. The steady-state - utility function - parameters of the model of narrow money (M1) estimated with cointegration techniques are stable over the foreign exchange rate regime shift; whereas in the model of harmonized M3 (M3H) they are not stable. The theoretical model fits the M1 data. The adjustment cost parameters of the M1 model describing the dynamics of the demand for money might indicate technological improvements in banking and payments during the sample period. These results suggest that from the Finnish point of view M1 would be a more appropriate intermediate target for monetary policy than harmonized M3.
Volume (Year): 23 (1998)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/econometrics/journal/181/PS2|
When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:23:y:1998:i:3:p:317-337. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.